Read More

The pair are now "engaging with each other" to resolve the dispute, it added.

The contract was SLA's largest single client.

But Standard Life Aberdeen said it "does not agree that, following the merger of Aberdeen Asset Management plc and Standard Life plc, SLA was in material competition in the UK with Lloyds Banking Group and that, therefore, SLA does not consider that Lloyds Banking Group, Scottish Widows or their respective affiliates has the right to terminate the IMAs (investment management arrangements)".

Lloyds said it was "disappointed" by SLA's move.

A spokesman for Lloyds added: "Standard Life Aberdeen is a clear and material competitor of Scottish Widows and Lloyds Banking Group in the UK and to suggest otherwise is not credible."

He added: "We are confident of our legal position and that our actions are in the best interests of our customers, and we are therefore surprised at the course of action pursued by Standard Life Aberdeen."

The investment management deal is currently set to end after a 12-month notice period, as required under the original agreement between Aberdeen Asset Management and Lloyds.

Aberdeen took on the deal to manage the £109 billion of assets when it bought Scottish Life Investment Partnership from Lloyds in 2014.

Read More

But there was a clause allowing Lloyds to end the mandate if Aberdeen merged with a competitor and this was triggered by last summer's £11 billion tie-up between Standard Life and Aberdeen Asset Management, creating the UK's biggest fund manager.